Russel 2022 Preliminary Index Additions and Deletions and CLOV

Summary: Yearly Reconstitution of the Russell Index could provide juicy opportunities by looking at the addition and deletion list. As a CLOV bag holder, I am playing CLOV. * Do your own DD, your mileage may very, past performance... (All that stuff) ----------------------------- In the world of buying short term options, this event screams of guaranteed good times. On Friday at 6pm eastern, Russell released their preliminary list of additions and deletions to their index. Additions - https://content.ftserussell.com/sites/default/files/ru3000_additions_20220603.pdf Deletions - https://content.ftserussell.com/sites/default/files/ru3000_deletions_20220603.pdf Russell Reconstitution Timeline - https://www.ftserussell.com/press/ftse-russell-announces-2022-russell-us-indexes-reconstitution-schedule Focusing on additions( and only looking at daily highs) here are some statistics on last years index update. Of the 253 that were in the final addition list I was only able to pull data for 244 for yahoo. Of the 244 all but 2 had a higher high laser in the month as compared to June 4th(the day the list was released last year). The average monthly high was nearly 20% higher than the close price on June 4th(The high for the 2000 index was up 2.8% as compared to June 4th). On average the high for the month was reached almost 12 calendar days after June 4th. Why does the Russell impact prices, because there are tons of indexes that track it. Most of the additions and deletions are from the Russell 2000. Here is a short list, but every bank that manages IRA's or 401k's also probably has their own index fund. If they want to match it officially, the new list becomes gospel on June 27th. If you can time the highs(and maybe the lows with deletions) you can turn a quick buck with options. ----------------------------------------------------------------------------------------------- | Trigger Warning, the flowing analysis looks specifically at CLOV | ------------------------------------------------------------------------------------------------ As a bag holder(and long term believer) of CLOV and fully invested, I have purchased $3 calls for June 10th and July 1st to attempt to take advantage of a possible short term price increase (I also hold leaps and shares). Bought these at almost 3x those prices :( Last year on June 4th the close price for CLOV was $9.00 and on June 9th it hit $28.85. Now this was in the meme heyday and CLOV was significantly shorted and only had monthly options that went up to the mid 20's. On June 10th is was announced that CLOV would not be added due to voting rights. By the end of the month CLOV was back in the low teens and has steadily fallen under $3 today. The list for 2022 came out and CLOV is once again on it. This year they should stay on it as the voting issue has been resolved. Will history repeat it self, yes and no(only my opinion). Will it hit $28 this month, NO. Will is nearly 3x this month, NO. I don't think it will squeeze, but I think there is some option activity will will help to support momentum of the price going up as a result of addition to the Russell $3000. I could see $3.5 - $4 as very reasonable. Let's look at some option data I have been collecting since November. First lets look at historical open interest: Here we can see that general option interest is decreasing. We can also see the expiration of the monthly options pretty clearly as well. This doesn't hint at much, but we can see that the last day on the chart June 3rd does have a slight up tick without account yet from option expirations and volume from Friday. So lets look at volume: Here we can see a spike in call volume, while not significant to anything seen in November, it is the highest since March. Because the open interest did not spike the day after the volume jump, I believe that options were being rolled to different dates and/or prices. One way we can holistically look at the option data is to look at the total gamma. For this I run a script that takes in to consideration every open contact and multiplies it by that option's gamma. Here we can see a spike in gamma on Friday, this alone also doesn't mean much. Gamma increases share price momentum only if those option are being delta hedged. Both puts and calls impact the momentum as puts can be delta hedged using shorts, and the further from in the money the put option is, the more shorts they will close. With likely price jump from the Russel addition, it is likely that they gamma will actually come in to play in the total deltas. If price doesn't change, gamma doesn't matter as it is momentum based. As a purely speculative exercise, because the way I run the script by taking open interest x gamma we can really multiply the number on the chart by 100 to see the total change in total delta. In this case just using calls, that is 14.5 million shares if 100% of the options were delta hedged.(Very unlikely) Conclusion Playing CLOV with the Russell additions is a lottery ticket like most options plays. I think it hitting a high of $4 this month is completely reasonable even if it doesn't stick short term. With $3 call break evens at $3.03 and $3.10 for the June 10th and July 1st expiration respectively, I may add a few more. The significance of the July 1st option is that it is the first Friday after the new Russell list become official. ā€‹ Russell Membership Correction 2021 - https://research.ftserussell.com/products/index-notices/home/getnotice?id=2600634

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Russel 2022 Preliminary Index Additions and Deletions and CLOV

Jun 6, 2022

bullish

general Analysis

[5 min Read]

blog post cover photo

Photo by: Owen Beard

Summary: Yearly Reconstitution of the Russell Index could provide juicy opportunities by looking at the addition and deletion list. As a CLOV bag holder, I am playing CLOV.

* Do your own DD, your mileage may very, past performance... (All that stuff)

-----------------------------

In the world of buying short term options, this event screams of guaranteed good times. On Friday at 6pm eastern, Russell released their preliminary list of additions and deletions to their index.

Additions - https://content.ftserussell.com/sites/default/files/ru3000_additions_20220603.pdf

Deletions - https://content.ftserussell.com/sites/default/files/ru3000_deletions_20220603.pdf

Russell Reconstitution Timeline - https://www.ftserussell.com/press/ftse-russell-announces-2022-russell-us-indexes-reconstitution-schedule

Focusing on additions( and only looking at daily highs) here are some statistics on last years index update.



Of the 253 that were in the final addition list I was only able to pull data for 244 for yahoo. Of the 244 all but 2 had a higher high laser in the month as compared to June 4th(the day the list was released last year). The average monthly high was nearly 20% higher than the close price on June 4th(The high for the 2000 index was up 2.8% as compared to June 4th). On average the high for the month was reached almost 12 calendar days after June 4th.

Why does the Russell impact prices, because there are tons of indexes that track it. Most of the additions and deletions are from the Russell 2000. Here is a short list, but every bank that manages IRA's or 401k's also probably has their own index fund. If they want to match it officially, the new list becomes gospel on June 27th.



If you can time the highs(and maybe the lows with deletions) you can turn a quick buck with options.

-----------------------------------------------------------------------------------------------

| Trigger Warning, the flowing analysis looks specifically at CLOV |

------------------------------------------------------------------------------------------------

As a bag holder(and long term believer) of CLOV and fully invested, I have purchased $3 calls for June 10th and July 1st to attempt to take advantage of a possible short term price increase (I also hold leaps and shares).

Bought these at almost 3x those prices :(

Last year on June 4th the close price for CLOV was $9.00 and on June 9th it hit $28.85. Now this was in the meme heyday and CLOV was significantly shorted and only had monthly options that went up to the mid 20's. On June 10th is was announced that CLOV would not be added due to voting rights. By the end of the month CLOV was back in the low teens and has steadily fallen under $3 today.



The list for 2022 came out and CLOV is once again on it. This year they should stay on it as the voting issue has been resolved. Will history repeat it self, yes and no(only my opinion). Will it hit $28 this month, NO. Will is nearly 3x this month, NO. I don't think it will squeeze, but I think there is some option activity will will help to support momentum of the price going up as a result of addition to the Russell $3000. I could see $3.5 - $4 as very reasonable. Let's look at some option data I have been collecting since November.

First lets look at historical open interest:



Here we can see that general option interest is decreasing. We can also see the expiration of the monthly options pretty clearly as well. This doesn't hint at much, but we can see that the last day on the chart June 3rd does have a slight up tick without account yet from option expirations and volume from Friday.

So lets look at volume:



Here we can see a spike in call volume, while not significant to anything seen in November, it is the highest since March. Because the open interest did not spike the day after the volume jump, I believe that options were being rolled to different dates and/or prices. One way we can holistically look at the option data is to look at the total gamma. For this I run a script that takes in to consideration every open contact and multiplies it by that option's gamma.



Here we can see a spike in gamma on Friday, this alone also doesn't mean much. Gamma increases share price momentum only if those option are being delta hedged. Both puts and calls impact the momentum as puts can be delta hedged using shorts, and the further from in the money the put option is, the more shorts they will close. With likely price jump from the Russel addition, it is likely that they gamma will actually come in to play in the total deltas. If price doesn't change, gamma doesn't matter as it is momentum based.

As a purely speculative exercise, because the way I run the script by taking open interest x gamma we can really multiply the number on the chart by 100 to see the total change in total delta. In this case just using calls, that is 14.5 million shares if 100% of the options were delta hedged.(Very unlikely)

Conclusion

Playing CLOV with the Russell additions is a lottery ticket like most options plays. I think it hitting a high of $4 this month is completely reasonable even if it doesn't stick short term. With $3 call break evens at $3.03 and $3.10 for the June 10th and July 1st expiration respectively, I may add a few more.

The significance of the July 1st option is that it is the first Friday after the new Russell list become official.

ā€‹

Russell Membership Correction 2021 - https://research.ftserussell.com/products/index-notices/home/getnotice?id=2600634

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CLOV

Clover Health Investments, Corp.

2.24

-0.01
-0.44%

Return

-10.76%
Change % Since Posting
-0.27
Change Since Posting
2.51
Price When Posted

Metrics

4.00
Target Price
8/ 10
Confidence
1-2 Months
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